۱- Introduction

۲- Literature review and hypothesis

۳- Methodology

۴- Statistical analyses and results

۵- Conclusions, limitations, and implications for future research

References

Abstract

The purpose of this study is to investigate the determinants of capital structure over time and the level of leverage before, during and after a financial crisis. Using a sample of publicly traded Turkish firms for the period of 1989–۲۰۱۲, we hypothesize and find that firm size and industry median leverage are positively and significantly associated with leverage while profitability and growth opportunities are negatively and significantly associated with leverage. Furthermore, we hypothesize and find that leverage levels are different before, during and after a financial crisis. The results are consistent using both static and dynamic models of leverage. The results suggest that managers need to adjust their leverage during and after a financial crisis to meet their need for debt and equity financing.

Introduction

Turkey has increased its integration with the world’s economy particularly with Europe in recent years. Despite its benefits such as improvement in exports, employment opportunities and foreign direct investment, the open economic system makes Turkey more prone to the changes in global economy. The recent example is the impact of the 2008 global financial crisis on Turkey’s economy. For example, according to Turkish Statistics Institution, in 2009 (the period immediately following the 2008 financial crisis), Turkey experienced a significant decline in export, production and construction sectors. These three sectors declined by 32.8%, 10.8% and 13.4% respectively in terms of their volume values for 2009 as compared to those in 2008 (Turkey Statistics Institute (TUIK), 2012). During the second semester of 2008, the economic recession caused by the mortgage loan crisis in the U.S. has affected the global financial markets. Major capital market index such as Dow Jones (USA), Financial Times (UK), Nikkei (Japan), Hang Seng (Hong Kong), Straits Times (Singapore) decreased by 25.54%, 30.28%, 22.5%, 33.06%, 33.90%, respectively. Similarly, Turkey’s capital market index also decreased by 54% during this period as compared to the first semester of 2008 (WordPress, 2010).